Sempra, the electric and gas utility giant based in San Diego, California, reported disappointing second-quarter earnings. The company’s profit and revenue both missed Wall Street estimates, leading to a nearly 2% drop in its stock price.
Financial Performance
Sempra posted an adjusted profit of 89 cents per share for the second quarter, falling short of the expected 94 cents per share. Additionally, the company’s total quarterly revenue decreased by nearly 10% to $3.01 billion, missing the anticipated $3.4 billion.
California Segment’s Struggle
Sempra’s primary revenue driver, its California unit, posed considerable challenges. This segment comprises 82% of the company’s total revenue. For the second quarter, the California unit’s profit dropped to $316 million from $339 million last year. The unit’s revenue decreased by almost 3% to $2.63 billion, and electric sales fell significantly to 661 million kilowatt hours (kWh) from 974 million kWh a year ago.
Texas’s Growth Potential
In contrast, Sempra’s Texas unit, Oncor, shows promising signs of growth due to the anticipated surge in power demand. This surge is primarily driven by the increasing power needs of AI and data centers. According to Texas’s ERCOT (Electric Reliability Council of Texas), there will be a need for 152 gigawatts (GW) of power generation by 2030, a staggering 78% increase from 2023.
An executive from Oncor emphasized that they expect to serve about 40% of this future load. Sempra CEO Jeffrey Martin revealed that the company has received 341 new requests from large-load customers, representing around 80 GW of potential load, with approximately 59 GW from potential data centers.
Explaining Terminology
- Adjusted Profit: This refers to the company’s profit after eliminating one-time expenses or income to present a more accurate picture of its ongoing profitability. For example, if a company had to pay a large lawsuit this quarter, they might adjust the profit to show what it would have been without that expense.
- Revenue: This is the total income generated from sales of goods or services before any costs or expenses are deducted. Think of it as the money a store makes in total sales before paying the rent, utilities, and employees.
- Kilowatt Hour (kWh): A measure of electricity consumption. For example, a 100-watt light bulb running for 10 hours uses 1 kWh of electricity.
- Gigawatts (GW): A unit of power equal to one billion watts. It’s a way to measure large-scale power generation capacity. For perspective, one GW can power approximately 750,000 homes.
While Sempra’s performance in California has dampened its second-quarter results, its Texas unit’s potential provides a silver lining. The increasing demand for power from AI and data centers could drive substantial growth for Oncor in the coming years. Investors should monitor these developments closely, especially the impact of emerging technologies on power demand in Texas.
